Luckin gets another delisting notice from Nasdaq, shares slump 18%

FILE PHOTO: A cup of 'Luckin Coffee' coffee is poured during the company's IPO at the Nasdaq Market site in New York, U.S., May 17, 2019. REUTERS/Brendan McDermid/File Photo

Luckin Coffee Inc disclosed on Tuesday that it received a delisting notice from the Nasdaq Inc last week after it failed to file its annual report, sending the shares of the Chinese coffee chain down about 18%.

This is the second notice from the U.S. stock exchange. The previous one was issued in May after the company announced a probe saying that a top executive fabricated and overestimated as much as 2.2 billion yuan ($311.5 million) in 2019 sales.

The latest reason cited by the Nasdaq is in addition to the two bases disclosed last month – public concerns raised by the fabricated transactions and the company’s failure to disclose material information.

The Chinese company, which competes with U.S. coffeehouse Starbucks, said the failure to file its annual report was due to delays caused by the COVID-19 pandemic and as it awaits the result of the internal probe.

The company will hold an extraordinary general meeting next month to vote on whether to oust several directors, including chairman Charles Zhengyao Lu.

Luckin‘s shares have plunged more than 85% since April since the internal probe was announced and has resulted in the company defaulting on a loan secured by pledging millions of shares.

The shares were down at $2.6 in premarket trading after rising earlier in the day following a Reuters report that it picked investment bank Houlihan Lokey also appointed by troubled German tech firm Wirecard, as an adviser.

Luckin Coffee picks Houlihan Lokey as adviser

Luckin Coffee has picked investment bank Houlihan Lokey as an adviser, according to sources close to the matter, following an accounting scandal that has seen the Chinese coffee chain’s shares plummet and creditors pursue assets held by the firm’s family.

Houlihan Lokey’s remit will be to provide financial and strategic advice, one source said.

A Cayman Islands court last week granted lenders, led by Credit Suisse, a court order to wind up Primus Investments Fund and Mayer Investments Fund, entities holding shares in Luckin Coffee and ultimately controlled by the family of the coffee firm’s Chairman Charles Zhengyao Lu.

The lenders are seeking to recover about $324 million of outstanding debt, according to a Cayman Islands court filing.

Luckin’s fortunes have crashed since an internal probe showed much of its 2019 sales was fabricated and overestimated by 2.2 billion yuan ($311.31 million).

Houlihan Lokey has experience with advising other companies in financial distress. It was last week appointed by troubled German tech firm Wirecard to assess its options and is advising the founder of United Arab Emirates-based hospital operator NMC Health.

Luckin Coffee and Houlihan Lokey were not immediately available for comment.

Nasdaq-listed Luckin Coffee’s shares fell 11% on Monday after IFR reported shareholders will vote to oust Lu and other directors at an extraordinary general meeting on July 5. The stock, which was halted from April 7 to May 19, has lost around 85% of its value since the probe was revealed.

Reuters 

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.